Don't look now but Shake Shack has been one of the hottest stocks of early 2019, growing 32.72% since the beginning of the year.
What's not to love about Shake Shack? It's to Steak & Shake what Chik-Fil-A is to KFC, but without the intrinsic homophobia. So it makes you wonder: is Shake Shack doing a little too well for itself? After all, it's not In N' Out. Longbow Research suggests that prospective Shake Shack Investors wait till the stock takes a little dip before they buy any shares in the hot stock. Specifically, they downgraded their target purchase price from $54 to $49 after Shake Shack's stock price eclipsed their original target price. Longbow still remains opportunistic about a potential decline.
“We recommend investors remain opportunistic in the event of a short-term pullback, especially if the shares of Shake Shack (SHAK) decline into a high $40s/low $50s range,”
Investors seem to agree with Longbow's position, most notably J.P. Morgan which issued a similar position in early May.
In a Monday note, its analysts lowered their rating on the shares to “underweight” from “neutral,” setting a $49 price target that is some 15% below current levels. “We maintain the highest praise for management, the brand, and continued industry-leading growth,” they wrote, instead citing valuation.
The criticism is intriguing given that the position was taken in Early May. Although Shake Shack has not been able to maintain consistent growth over the past weeks, but it's price fluctuations have been consistent with the S&P 500 and Barron's Next 50 Indices.
Right now Shake Shack looks like the kid, let's call him Matt, who was kind of cool in high school and had a solid group of friends, but really flourished at college after he got his bid from Alpha Sigma Sigma. During pledgeship, Matt transformed into a full-fledged frat star, and according to his social media accounts, he is absolutely crushing it.
Many analysts know Matt's doing well, but we all know he's going to struggle a little bit when his parents discover his newfound alcoholism during his first Thanksgiving Break. After they threaten to pull him out of school, Matt realizes that he has no choice, but to settle down a little bit. For those who befriended him during his tear, he was the man and the parties were totally wicked, but his substance abuse recovery made him so melancholy, and no one wants to be around a Debbie Downer.
But these are banks, so they'll be most interested once it hits a new low. But then again, people tend to prey on others when they're at their lowest, so I should get off my high horse.
Shake Shack: Too Much of a Good Thing? [Barron's]